Breast implant lawyer told to refund $35.7 million

Breast implant lawyer ordered to refund $35.7 million

MARY FLOOD, Copyright 2007 Houston Chronicle |
July 19, 2007

Houston plaintiff lawyer John O'Quinn has been ordered to refund at least $35.7 million to more than 3,000 former breast implant litigation clients, according to an arbitration panel decision released today.

With interest and attorneys' fees, O'Quinn could owe almost $60 million.

O'Quinn called the decision ``unfair'' and ``illogical'' given that even the panel also acknowledged he did a good job for these women.

``I didn't cheat anybody,'' O'Quinn said. ``We got people record results and charged the least expenses of any law firm in town.''

The arbitration decision arose from a class action lawsuit against O'Quinn filed in 1999 by three ex-clients in East Texas. That lawsuit was later joined by thousands of women alleging O'Quinn improperly took funds from their settlements for group charges they had not agreed to pay.

"Quite simply, if O'Quinn is allowed to improperly withhold client funds with impunity, other lawyers may believe that they can do likewise. Such a result would destroy the very integrity of the special and unique relationship that exists between attorney and client," the final order states.

The order says that O'Quinn, through three legal entities under which he has practiced law, must pay back $10.7 million he improperly charged clients and a $25 million penalty because he broke his contract with them.

The interest accumulated since the case began eight years ago could be more than $21 million. And he will be asked to pay about $2 million in legal fees for the lawyers his ex-clients hired.

O'Quinn's lawyer Billy Shepherd said he and his client respect the panel but are disappointed and they disagree with the decision. He said they plan to appeal.

Shepherd noted that the women suing O'Quinn had asked that he give back some $500 million, what they estimated to be his total fees, but $35.7 million is a small percentage of that request.

``John O'Quinn got extraordinary results and with low expenses,'' Shepherd said. He said he disagrees with the arbitrators' conclusion that the O'Quinn contracts did not make it clear that the general expenses could be charged to clients since the contracts said all litigation expenses could be charged.

Shepherd disagrees with the plaintiff's estimate that interest could be as high as $21 million.

And when asked about the three O'Quinn law firm entities held responsible in this decision, Shepherd said ``there is no question that John O'Quinn individually is not personally liable.''

In a preliminary decision issued in March, two of the three lawyers serving as arbitrators in the case found that clients' contracts did not authorize the 1.5 percent he collected from each client's settlement for general expenses. Those improper general expense deductions included professional association dues, flowers, fundraising, other lawyer's fees, and overhead, the arbitrators said.

Joe Jamail, lead lawyer for the suing women, who has butted heads with O'Quinn before, called the decision "a victory for the bar."

"It stands for the proposition that a lawyer has to obey the rules regarding his client," Jamail said, adding that a lawyer's most important duty is to clients.

"In a contingency case, you must outline expenses, you can't add them on unilaterally," Jamail said. "He charged off Bar dues, he charged off overhead. You just can't do it. What's the 40 percent (contingency fee) for if you're charging off your overhead?"

Jamail, known for decades as Houston's "King of Torts" for his work as a plaintiff lawyer, squared off against O'Quinn in 2001 when Jamail represented an O'Quinn associate who claimed O'Quinn bilked him out of millions in fees.

The implants case was not decided by the Rusk County court where it was filed, because O'Quinn's contract with the women required arbitration for disputes. A decision like this in a contracted arbitration generally cannot be appealed.

The arbitration panel for the O'Quinn case is ex-state District Judge Susan Soussan, who was picked by O'Quinn; defense lawyer Kenneth Tekell Sr., picked by the plaintiffs' team; and legal malpractice lawyer David Beck, chosen by Soussan and Tekell. Beck and Soussan who signed off on the final opinion, with Tekell concluding there should have been a different calculation of what O'Quinn owes.

Tekell also expressed concerns that O'Quinn funded a public relations campaign about his breast implant litigation and a Baylor study.

The order released today acknowledged that O'Quinn did an exceptional job for his clients and that many lawyers have trouble with how to charge shared expenses. But the order also said contingency fee contracts, like the ones O'Quinn had with the women, are meant to protect the clients and the contracts must state specifically what will be deducted.

The next step likely will be that Jamail and his team of lawyers on the case will finalize the interest calculations and file them with the Rusk County court. Though arbitrations have been held to be binding in such situations, O'Quinn and his lawyers will likely appeal the ruling anyway, even though the Texas Supreme Court has already said this case will be decided in arbitration.

That means it could be a year before any funds are disbursed. But it is still possible that O'Quinn, and perhaps some of his associates, would argue they are not personally liable since the three legal entities found responsible in the decision are John M. O'Quinn P.C., John M. O'Quinn & Associates and John M. O'Quinn & Associates L.L.P.

An important question in the case was whether the clients knew they would be charged the shared expenses. Beck and Tekell found in their March decision that the contracts didn't make that clear and it appeared not all clients were informed by the lawyers that general expenses would be deducted.

Soussan, who wrote a minority opinion in March, argued the women knew they were to pay for all litigation expenses, and knew O'Quinn had many other clients so they reasonably would have known they'd share expenses.

Though it went against him, the March opinion noted O'Quinn got "favorable results" for the breast implant clients.

O'Quinn told the Chronicle when the suit was filed in 1999 that "they got more money than they would have gotten from any other lawyer in America."

After the lawsuit was filed, O'Quinn sued the lawyers for the women, accusing the attorneys of libeling him. Soon after that the lawyers all stopped speaking publicly about the case.

This decision against O'Quinn is far less than the lawyer's total fees for all these clients, which was estimated in the lawsuit to be around $580 million but which the three arbitrators placed at about $263.4 million

A Texas Supreme Court case from 1999 opened O'Quinn up to the possibility of having to pay back all the collected legal fees. That case, Burrow v. Arce, held that if a lawyer breaks his fiduciary duty to a client by putting his own interest above the client's, he can lose part or all of his fee — even if the lawyer did a good job.

O'Quinn has had a career filled with stunning victories that placed him in the national spotlight and garnered multiple accolades. But he's also seen a lot of controversy as the State Bar has several times accused him of improperly soliciting clients.

He's made millions in breast implant, tobacco and other mass tort litigation. His philanthropy has resulted in several Houston landmarks carrying his name including a University of Houston playing field and law library, a children's assessment center in Rice Village and a hospital tower in the Texas Medical Center.

His controversial moments have included suits by attorneys he's worked with over fees and some run-ins with the law over his driving.

O'Quinn's been in the news recently both for his million-dollar contribution to the 2006 Texas gubernatorial campaign of Democrat Chris Bell and for representing Anna Nicole Smith's mother and getting involved in a dispute with the dead woman's lawyer companion.